ECONOMYNEXT- Earnings among listed firms are expected to grow over the next few quarters with a rise in consumer demand in the run up to elections, following which policy stability is expected, the research arm of First Capital, an investment bank, said.
“We expect… the upcoming elections to boost consumer demand and economic activity, resulting stronger topline growth for most companies,” Head of Research Dimantha Mathew said.
Political and policy uncertainty are also likely to settle following the election cycle for 2019/2020, he said.
“With Presidential Election to be held in fourth quarter 2019, we believe political uncertainty is likely to settle gradually bringing in policy certainty to the system.”
“Presidential Election may be followed by General and Provincial Elections where a similar trend is likely to follow in line with the past trends.”
Sri Lanka’s economic growth has fallen to around 2.5 percent due to long-term political and policy uncertainty, currency depreciation, as well as the Easter Sunday bombings in April 2019.
The All Share Price Index (ASPI) of the Colombo Stock Exchange fell to a seven-year low following the bombings, but recovered rapidly May through July, before correcting in August and September.
Sri Lanka extending an International Monetary Fund program, the central bank capping fixed deposit rates and the central bank-controlled pension fund buying stocks at the seven-year low contributed to the recovery in May, June and July.
A correction then occurred in August and September, before recovering further to a ten-month gain by end-October, due to the presidential elections.
Mathew said expected future earnings increases the confidence in the stock market further, and recommended to increase investments in equity.